In an extraordinary conversation at the U of M last week (somehow completely missed by the Minnesota news media) renowned economist Hernando de Soto delivered a fascinating and disturbing theory about the root cause of the continuing global economic crisis.

When the crisis exploded in the closing months of the Bush administration, de Soto said, he was stunned to hear the very top American financial regulators admit that they simply did not and could not know how much "unrecorded paper'' and undocumented financial dealing had been going on in the national and world markets.

Regulators basically were saying, "We don't really know what's going on,'' said de Soto. Developments in the world of derivatives and credit default swaps somehow resulted in western capitalism abandoning one of its most valuable characteristics and the true secret to its success. In de Soto's view, that secret is the fact that almost nothing is really secret, and "everything of value is recorded.''

Recurring crises and aftershocks, like those in Dubai, Greece and Spain, can be expected to continue, de Soto said. "You don't know who's next because you don't have the documentation.''

De Soto is a Peruvian, director of the influential Institute for Liberty and Democracy, by all accounts a brilliant thinker and theorist. He is an admirer of western capitalism, but also a promoter of capital formation in developing nations to benefit the poor. It's hard to imagine an economist who is more in sync with the idea that business growth AND social justice must be pursued simultaneously. He's been highly praised by both Ronald Reagan and Bill Clinton. His Holy Grail is convincing developing nations to build truly democratic and legitimate governments while getting their economies to abandon informal and corrupt systems and emulate western models of transparent and documented transactions.

The mainstream Twin Cities news media, partial victims of the crisis, continues to miss important developments in its own backyard on the global and national economic crisis. A couple of weeks ago, two substantive speeches in the Twin Cities by U.S. Rep. Barney Frank, a chief architect of the financial reform package in Congress, went uncovered by larger mainstream media, newspapers and broadcast.

It's great stuff. DeSoto's view of the West from a Third World perspective is enlightening and at times encouraging. He seems to be saying we have the right idea, and that we've been a role model, that democracy and markets work well for all people as predictably as "aspirin or an MRI," but we can't regress to developing world standards and turn our economy over to corrupt outlaws who operate in the dark.